Drug pricing brawl turns to PBMs

Pharmacy benefit managers feel some marketplace heat even as they establish new benefit programs


It’s a forgone conclusion that most of the consumer public doesn’t like pharma companies’ pricing policies, as headlines were grabbed last year by the dust-up over Valeant and Turing Pharma, and then the Mylan EpiPen controversy playing out now. Surrounding these were the shock to healthcare payers over the original $84,000 cost of Sovaldi, the Gilead Sciences hep C drug; the forestalled blow-up over PCSK-9 anti-cholesterol drugs and, most recently, Express Scripts announced plan to corral pricing (and market share) of a variety of anti-inflammatories, led by Amgen’s Enbrel and AbbVie’s Humira. In an election year, all this is playing out at a louder-than-normal volume.

Mylan's view of the flow of funds from its EpiPen; according to the firm, more revenue is in he channel than comes to  Mylan itself.

Mylan’s view of the flow of funds from its EpiPen; according to the firm, more revenue is in he channel than comes to Mylan itself.

Now, however, the spotlight is shining brighter on another part of drug pricing battleground: the pharmacy benefit managers (PBMs). That target was hinted at when Heather Bresch, CEO of Mylan, said that the company would supply an authorized generic of its own branded EpiPen product “because of the complexity and opaqueness of today’s branded pharmaceutical supply chain.” A new article, from Business Insider, lays out a compelling, if one-sided, critique of PBM practices. In particular (and something that is not a new finding), the leading PBMs are able to both negotiate drug prices with manufacturers, dictate reimbursement prices to dispending pharmacies, and manage the patient-support programs that manufacturers fund to protect patients from high copays and coinsurance—all without disclosing their actual costs (or reimbursements) to their client health plans and to dispensing pharmacies. This article is just the latest expose; there was some airing out of these issues when Anthem Health sued Express Scripts earlier this year; the latter has been handling the health plan’s drug benefit, and Anthem is claiming that it should recoup billions of dollars in lower costs from Express Scripts.

The anti-inflammatory program of Express Scripts, “Inflammatory Conditions Care Value Program,” involves close management of patients needing this therapy through its Accredo Specialty Pharmacy. Express Scripts contends that the category is dominated by “the two major nonspecific anti-inflammatory medications, which together currently represent 73% of the US market share for this therapy class” (i.e., Humira and Enbrel), while other “niche, single-indication products will be able to compete head-to-head with the nonspecific products, and this more precise approach to formulary management will enable Express Scripts to leverage the additional competition to make this therapy class more affordable for participating plans.” Patients currently on the market-leading drugs will be able to stay with them, and patients put on one of these other drugs but who stop using them will generate a rebate to health plans and, presumably, the patient.

This past week an analyst from Leerink Swann, an investment bank, noted that Humira’s price has been increasing on average by 6% every three months for the past three-and-a-half years, while Enbrel has been averaging a 3.5% price increase over that span. In the Forbes article about this analysis, Leerink noted that Humira could become the first $15-billion/yr pharma product, given the current trend.

The Pharmaceutical Care Management Assn., a trade group of the leading PBMs, is fighting a many-front battle over its position in the drug-pricing battles. The association published a survey—not of its clients, many of whom are health plans or large employers, but of 400 owners and executives of companies of all sizes. By a 3:1 margin, these businesspeople believe that the private sector is a more effective way to address drug pricing than government; and that nine out of 10 are “satisfied” with the PBM resources they employ or use. Specifically, when asked to choose their top two objectives, 54% of respondents said reducing overall costs, and 45% said reducing premiums and other out-of-pocket costs for consumers. Also, that “very few” cited issues such as “transparency” of payments to drugstores, or rebates to pharmacy benefit managers.

“Employers’ concerns about high drug prices are real but so are their fears that new government mandates – however well intended – would make things worse,” said Mark Merritt, PCMA president, in a statement. PCMA, and its members, have a long track record of demonstrating better health outcomes and cost savings through their programs, but the question is growing, “At what cost?”

However, the options are not either government pricing mandates or sticking with PBMs; the Business Insider article points to an effort among a group of large employers, the Heatlhcare Transformation Alliance, as something of a rebellion against heathcare intermediaries like PBMs. The Washington, DC-based group, still forming up, doesn’t call out PBMs directly, but does state that “employers rely on a broad range of organizations to procure health care services, and often these organizations serve interests not aligned with the interests of employers and the people they employ,” and that “Patients, along with the health care system, too often pay for prescription drugs that are not the most cost effective for their care … This happens in part because incentives currently built into the delivery system have made it habitual to pass costs along.”

Another confrontation is a closely watched referendum in California, Proposition 61, the Drug Price Standards Initiative, which calls for state agencies to pay the same prices as the US Dept. of Veterans Affairs. VA pricing is usually negotiated directly between manufacturers and VA—so this would bring the vaunted “single payer” system closer to fruition. VA drug costs are generally regarded as some of the lowest available; the catch is that not all drugs are on the VA formulary. Prop 61 will be one of many initiatives California voters will be deciding on Election Day in November.

As with drug products themselves, there isn’t a one-size-fits-all solution to rising drug prices; pharma executives will need to monitor ongoing developments closely in the months ahead.

 

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